The final item of business is a members’ business debate on motion S4M-00016, in the name of Mark McDonald, on North Sea taxation. The debate will be concluded without any question being put.
Motion debated,
That the Parliament notes the decision of the UK Government to increase supplementary tax on North Sea oil production from 20% to 32%; notes that this decision was made without consultation with the industry and has led to uncertainty in the oil and gas sector; notes the decision by Statoil, immediately after the budget, to put on hold a $10 billion plan to develop the Mariner and Bressay fields and that other companies also have said that they are likely to reduce investment; further notes the report from Professor Alex Kemp of the University of Aberdeen, which shows that the tax rise could reduce UK oil and gas expenditure by up to £50 billion, investment by up to £30 billion and production by up to a quarter over the next three decades and the report from Oil and Gas UK that there has been a dramatic drop in confidence throughout the UK upstream oil and gas industry in the first quarter of 2011 in marked contrast to the highly positive business outlook recorded in the fourth quarter of 2010; believes that if the tax rise is fully implemented it will have a severe impact for future jobs and the economic prosperity of Aberdeen and the north east of Scotland, and welcomes the clear commitment by the First Minister to raise this matter with the Chancellor of the Exchequer.
17:04
I thank the members on all sides of the chamber who have signed the motion that I lodged. This is a topical and relevant debate. Although this Parliament has no direct locus in North Sea taxation, it is incumbent on us to speak in support of an industry that is vital for so many jobs and for our nation’s economy.
In drafting the motion, I tried my best to construct a consensus approach on the issue. This Parliament has form in coming together on a reserved issue, as we saw in the previous session with regard to the Moray air bases. In that debate members on all sides of the chamber recognised that the decision that was being taken at Westminster would have a dramatic and devastating impact on communities in Scotland, and they united behind the campaign.
With that in mind, I particularly welcome Alison McInnes’s support for my motion. Although her party is part of the Government in London, I recognise that she perhaps does not agree entirely with the decision that has been taken. I therefore want to avoid making this a political debate, and I hope that we can focus instead on looking at things from an industry perspective and work together on that basis.
I mentioned the Moray air bases, but I recognise that the impact that we are talking about in this case is on a different scale. However, there is still deep concern over the changes to the supplementary charge and the ramifications for the industry. The decision to increase the supplementary charge from 20 to 32 per cent came as something of a bolt from the blue for the industry. There was no prior consultation or any indication that it was going to happen. Indeed, in the build-up to the budget, the industry received conciliatory noises from the Treasury that it would remain unaffected as a result of the budget process. That can lead one to assume only that it was a last-minute decision by the Treasury, rather than some sort of long-term plan. The very last thing that the energy and offshore oil industry needs is short-term, knee-jerk decision making, as opposed to long-term, strategic planning in consultation with the industry.
The decision has two impacts. There is a direct impact on the companies that are being taxed, and an impact through disincentivising investment. That affects not only new-field production, but those companies that specialise in extracting from the harder-to-reach and older fields. The higher rate of taxation applies to those older fields irrespective of whether the company is newly exploiting them or has been doing so for a long time.
There is also a secondary impact. Often, when the argument is taken to the public they will say, “Why should we feel sympathy for oil companies that are making large profits?” I understand their argument in some cases, but not every company that operates in the offshore sector is making large profits, as evidenced by the downturn in investment as a result of the decision. The secondary impact that we must bear in mind relates to the supply chain, which depends on investment in the oil industry.
There are a lot of small companies in the north-east of Scotland that depend on investment in the oil and gas sector for their future business. It is therefore just as important and imperative for those companies that the decision is re-examined as it is for the majors and the companies that operate offshore.
With that in mind, I welcome the approach that the Scottish Government has taken on the issue. There has been no foghorn diplomacy: a constructive approach has been taken, which is to be welcomed. The approach has been to offer alternatives to the Treasury with regard to how it could tax the offshore sector differently while increasing the confidence of the sector.
That confidence is important. Goldman Sachs published a document in May 2011 that provided insights into European oil and gas fiscal regimes. It said in its analysis that
“fiscal stability has been key to encourage exploration and innovation ... Low taxes clearly encourage activity: Our production forecasts in major new fields ... has increased 127% since 2006 in countries with a below-average tax rate vs. only 63% in above-average tax regimes. More tellingly, we have increased our forecast for countries with a stable or falling tax take by 150%, compared to a 19% fall in countries which have increased taxes over the same period.”
I do not oppose the concept of taxation on profit or, indeed, taxation on the sector; neither does the sector. The sector is asking for stability and consultation, neither of which demands is unreasonable. With that in mind, I brought this debate to the chamber.
When the United Kingdom Government looks at the submission from the Scottish Government—built on the work of Professor Alex Kemp and Linda Stephen in their paper that was produced in April 2011—I hope that it will conclude that what is required is a rethink on the issue. I hope that the UK Government will take another look at the taxation that is being levied on the industry and at the ways in which the Government can encourage and stimulate investment so that the potential for future jobs and economic benefits is not lost further down the line. More important, we do not want the many small businesses in the north-east that depend for continuing business on the oil industry and continuing investment in it to have to sit and worry about what will happen to them in three, four or five years’ time.
I hope, perhaps forlornly, that we can get cross-party consensus on the issue. I will wait to see what the Conservative members say on the matter. They have not yet signed my motion, although they may have thought that a sort of bear trap was being set for them—I assure them that it was not. I would be more than happy if they changed their tone and signed the motion after the debate. I would welcome them with open arms.
I hope that we can build cross-party consensus on the issue and send the message that the oil and gas sector needs stability. I welcome very much the Government’s approach.
17:11
To understand what is going on here, we must look at the key facts from Oil & Gas UK’s survey. According to it, the tax change has rendered marginal 25 projects, £12 billion of capital investment, the production of 1.04 billion barrels of oil and gas equivalent, and 30 per cent of investment in projects that were previously considered likely to proceed in the next decade. The reduction in production will necessitate energy imports worth £50 billion, result in lost tax revenues of £15 billion to £20 billion and forgo the creation of around 15,000 jobs. The tax change will accelerate the decommissioning of 20 fields and associated infrastructure by up to five years.
Those are the key facts, but the realities are somewhat different on the ground. We can talk about numbers, but the changes to which I referred have had a major effect on people in my constituency, throughout the north-east and across Scotland. After the tax increase was implemented, it was interesting to find as we went around the doors during the election campaign in Aberdeen that people were talking about it in their droves and had real concerns about it. I am sure that members who campaigned in the city at that time know that that was the case.
I always say that when the oil industry sneezes, Aberdeen and the north-east catch a cold. Previous downturns in the industry have caused great difficulty for the area that I and others represent. Concern for the future of those who work in the industry and those who rely on it is what troubles me the most.
As my colleague Mark McDonald said, the tax increase was a bolt from the blue for the industry. Prior to the budget, there were noises that everything was going to be okay, then suddenly something different happened. Mark McDonald is right to say that what is required is stability and consultation. Situations such as this, when no consultation has taken place, can often scare companies into going elsewhere. We can see that, across the globe, there is a move to areas with stable or lower tax regimes.
In recent times, we have seen investment in Brazil and Angola and away from places such as the UK and Kazakhstan. We must get stability back and ensure that in future such measures are accompanied by a great deal of consultation. We need the chancellor to talk to the oil and gas sector and to listen to what it has to say, because the short-term gains that he intends to make mean that tax take in the long term will probably be much lower than it would otherwise have been.
My plea is for cross-party support for Mr McDonald’s motion, because it is vital not only for the north-east of Scotland but for Scotland as a whole.
17:15
I congratulate Mark McDonald on securing a members’ business debate so early and on such an important subject. Rightly, he highlights the impact of the unexpected tax rise on confidence in the oil and gas sector, which is critical.
Neither I nor the Labour Party is opposed to windfall taxes. Labour was elected in 1997 on a manifesto pledge to impose a windfall tax on the privatised utilities to pay for the new deal for long-term young unemployed people. That was to the benefit of many thousands of young people. The companies in question did not like paying more, but they had plenty of warning, the extra revenue paid for essential Government action and the measure was introduced only because millions of voters agreed that that was the right thing to do.
A decision five years ago to increase the supplementary charge on offshore profits was in a different category. I was vice-chair of the industry-Government task force—Pilot—at that time and heard the sector’s concerns at first hand. Its central complaint then was not about the cost of the increased charge but about the fact that it did not see it coming. After that, UK Labour energy ministers and Treasury ministers worked hard to ensure that lessons were learned, that Pilot’s views were taken on board across Government and that there were no more surprises. That job was done and trust had been restored by the time Labour left office last year.
Earlier today, we were reminded that the present Chancellor of the Exchequer was a strident critic of the tax increase five years ago. His actions now contradict what he said then and undo all the good work that has been done to improve relations between the Government and industry ever since. It will take a long time to restore investor confidence in the present British Government. We know that from experience and from what we hear every time we talk to people in the industry, as we did last night at the cross-party group on oil and gas.
The Treasury needs first to look again at the offshore tax regime as a whole. Iain Gray welcomed the publication of options for reform by the Scottish Government last Friday. Any one of those options would improve the investment prospects of a significant number of marginal fields.
It would also be helpful for the UK Government to take off the table proposals for reform of air passenger duty, which as drafted would treat the helicopters that take men and women to work in the North Sea the same as it would treat luxury private planes. If the chancellor had made that journey to work a few times, I am certain that he would understand the difference. Earlier today, the First Minister confirmed his understanding that currently the proposals are being “reinterpreted”. That is welcome, as long as it means that they are to be dropped. The consultation on the proposals closes tomorrow. An early announcement by the UK Government of its conclusions, throwing out the proposals, would be welcome.
UK ministers might also think about another point that was made this week in a submission on air passenger duty from Aberdeen airport and from business organisations and local authorities in the north-east. They argue that the region has no realistic alternative to air travel to connect to Heathrow and London, and that that should be recognised in a local rate of APD.
Alex Salmond and the Scottish Government argue for devolution of air passenger duty. If UK ministers want to resist that argument and to recognise the special place of north-east Scotland in the wider British economy, a local rate of APD might commend itself and offer a small but significant step towards regaining the trust of the oil industry. After all, this debate is all about trust; it is about trust, investor confidence and jobs. I hope that the message that is coming from the Parliament tonight will be heard loud and clear by those who make the relevant decisions.
17:20
I congratulate Mark McDonald on securing this debate on this important subject. I also congratulate him on the way in which, at such an early stage in this session, he has put me up there on the tightrope on which I have had to walk so often in the Parliament. Here I am—back up on the high wire.
The subject is an important one, and I welcome the tone in which Mark McDonald addressed his motion. It is important not to undermine confidence any more than it has already been undermined—I sometimes worry about that. I forgive Kevin Stewart because he did not overdo it, although he was perhaps in danger of talking up the impact of the measure and, consequently, of talking down the industry. He did not do that, but he came close a couple of times.
We must realise that the process that led to the decision that was made was complicated—it consisted of two processes running in parallel. In the north-east, we often forget the pressure that has existed to deal with fuel taxation. The opportunity to abolish the fuel tax escalator and to introduce the fair fuel stabiliser, which is so important to so many areas of Scotland, ran parallel to the decision-making process that led to the changes that are now proposed with regard to the North Sea. Ultimately, the argument was that the measure will be revenue neutral in the long term. It was to move taxation from the forecourt—the retail end of the oil industry—to the production end.
Will the member give way?
Will the member give way?
No, thank you.
Having said that, I am the first to admit that the measure has an obvious impact on the oil production industry.
We also forget that the proposals that are contained in the budget book also addressed the opportunity to create—in addition to petroleum revenue tax and enhanced corporation tax—a third field class, which could be used, if negotiated, to boost the return on investment from newly developed fields and new exploration. That opportunity is still on the table.
On the statements that have been made by Oil & Gas UK, it is always disappointing when organisations such as it appear to come down on one side of an argument or the other, but Oil & Gas has cleverly kept a conciliatory tone in the process. I am aware that it is already communicating with and consulting Government representatives to see what can be achieved and how to make progress on the matter.
There are many competing priorities. On the positive side, we heard this week that almost 50 per cent of the work that the service industry in the north-east does and of the turnover that it achieves is outside the north-east or the North Sea basin. Our area thrives when the industry succeeds even in other parts of the world.
I am genuinely hopeful that, in the next couple of days, air passenger duty will be neutralised as an issue. A number of different issues surround the discussion, and I do not wish to come down on one side or the other of it; it is my priority to take a neutral position. The negotiations between all the parties concerned should continue apace, and any opportunities that arise should be taken to improve the regime in the North Sea, to support long-term investment and to sustain the North Sea oil and gas industry for as long as possible into the future. Those are vital aims and are worthy of achievement. We will continue to observe the process, and to do so in as constructive a manner as possible, in the current environment.
17:24
I, too, commend Mark McDonald for securing his first members’ business debate and for choosing such an important subject to highlight. I support his motion and I hope that the representations that are made both here and at Westminster, not least by my colleagues Malcolm Bruce and Sir Robert Smith, will bear fruit. It is important to press for changes to mitigate the impact of the tax rise.
The main issues that are worthy of detailed dialogue between the Chancellor of the Exchequer and the industry relate to the price of gas, which is about half that of oil; to a recognition that mixed oil and gas fields command a lower average price than oilfields; to the application of allowances to enable marginal projects to go ahead; to some kind of sliding scale to ease the hit; and to a clear indication of how and when the tax may be reduced.
The Treasury also needs to acknowledge that capital investment for the small and medium-sized operators coming into the North Sea comes from a range of small and medium-sized investors, who will be deterred by the sudden change in tax which, as Kevin Stewart said, makes the United Kingdom look like a risky investment compared with other countries where costs are lower and the tax has not changed.
A few days before the budget announcement, representatives from ACSEF—Aberdeen city and shire economic future—which is a partnership between public and private sectors in the region, were in our Scottish Parliament meeting MSPs to raise awareness of the role that the north-east of Scotland plays in the wider economy of Scotland.
ACSEF believes that the region is well placed to help to grow the Scottish economy and I agree whole-heartedly. Sadly, its representatives were, on the whole, preaching to the converted, in that the meeting was attended by North East MSPs but scant few others. A year or so ago I attended a business-Parliament exchange day at BP North Sea headquarters, which was again attended by North East MSPs but by only a few members from outwith the region, who came away saying that, until then, they had no idea how much the industry contributed to the rest of Scotland. It has always surprised me how little this key industry is understood outwith the north-east, and I think that that is one of the problems that it faces.
I am a member who is not from the north-east, although many of my constituents share an interest in what happens with the industry because they travel to the north-east to work. I do not think that the member is at risk of undermining the industry, but does she share the concern that the tax, if it is not reconsidered, may well affect a huge number of jobs? It may not necessarily be the case that jobs are lost, but that jobs are not developed in the industry as a consequence of the policy.
Yes. I have said that I support the motion and I recognise that there is a danger of jobs being forgone in the future.
We all need to act as ambassadors for the industry and we should not tire of explaining its value to Scotland and the UK. We sometimes think that we have made the case, but this example clearly shows that the case has to be made over and over again.
Aberdeen city and shire is already punching above its weight in terms of its economic contribution, as the region has the highest gross value added in Scotland and is second in the UK only to London. The region contributes £266 million in business rates every year, accounts for £6 billion of international exports from Scotland and supports 200,000 Scottish oil and gas jobs. The region’s key sectors are oil and gas, tourism, food and drink, and life sciences.
When ACSEF was here in Parliament, Tom Smith said:
“Aberdeen City and Shire has the potential to drive Scotland out of recession, creating new jobs and wealth. A stronger Aberdeen City and Shire will make for an economically stronger Scotland.”
He went on to say that
“All recent reports point to a very bright short to medium-term future for the region”.
Then, a few days later, the chancellor dropped his tax bombshell and jaws dropped across Aberdeen city and shire. Businesses, councils, academics and politicians from across the spectrum have spoken out against the tax. Just as the industry was poised to make its biggest investments for years, it was knocked back. The industry says that that will lead to a review of forthcoming projects and, as other members have said, it could lead to a loss of jobs and contracts.
I welcome the fact that the First Minister has proposed changes. My colleagues Malcolm Bruce and Sir Robert Smith have been active in Westminster, working closely with the industry to persuade the Government to make adjustments that will maintain North Sea investment that might otherwise go elsewhere.
The worst part of it all was that there was no consultation or warning, and there is no doubt that that is what has damaged investor confidence. I call on the Government to ensure that this is the last time the industry is dealt such a bolt from the blue.
17:28
I, too, congratulate my colleague Mark McDonald on securing this members’ business debate, particularly as it is his first one.
The debate is on an issue that is fundamental to members of the Parliament from across the north-east. I declare an interest as I used to work in the oil industry, as so many constituents of the north-east and other MSPs in the chamber currently do. As Mark McDonald said, the health of the industry has a knock-on effect on every part of the economy in the region, so I welcome this chance to debate this critical issue.
As other members have said, George Osborne’s tax grab came like a bolt from the blue and sent shockwaves through Aberdeen and the wider region. Like Kevin Stewart, I was surprised by how many people it affected and by how many people articulated that to us on their doorsteps during the election. It has put investment in the industry and, consequently, jobs at risk. As Ian Bell of Optimus said at the time,
“The chancellor has just brought the recession to Aberdeen. Thanks for nothing, George.”
As someone who worked in the oil industry in the 1980s, when it experienced a severe downturn, I know how traumatic that can be.
The tax rise has a fundamental problem at its core, which is that it was clearly drawn up by someone who has no understanding of how the industry works. I suspect that Danny Alexander is rather regretting claiming full credit for it. Obviously, like Alex Johnstone, he did not recognise that those who are operating the forecourts now are not the ones who are at the cutting edge of the technology that is required in the North Sea nowadays.
The blanket approach to the increase in the supplementary charge takes no account of whether a field is new or well established; of whether it is profitable; or of whether investment in it is planned. It has already caused investments in the North Sea to be suspended, with Statoil's development of the new Mariner and Bressay fields put on hold, and that will only continue while the tax remains unchanged. Modelling by Professor Alex Kemp of the University of Aberdeen estimates that 79 fewer fields will be developed over the next 30 years than there would otherwise have been. That could have a huge effect on the economy of the north-east.
I am glad that the Scottish Government has put forward constructive proposals for how the supplementary charge can be altered to mitigate its most harmful effects, and I welcome the engagement that it is having with the Treasury. It is seeking to make the system of taxation more progressive, so that investment in new developments is encouraged to the long-term benefit of everyone. It seems unbelievable that the Government is cutting off its nose to spite its face by cutting off a huge amount of future revenues just to meet a budget deficit in the short term.
Mitigation of the effects could be achieved by introducing a rate of return allowance on field investment before a field pays the supplementary charge; by introducing an investment uplift allowance for the supplementary charge; or by extending field allowances. Any of those suggestions would go some way to mitigating the actions of the UK Government, and I hope that members across the chamber will agree that the Chancellor of the Exchequer should pay heed to them.
There is also a major issue in current policy when it comes to decommissioning oil infrastructure. Previously, at the end of a field's life, companies could apply for tax relief up to the level of tax being imposed on a field to mitigate that cost. With the increase in the supplementary charge, that is no longer the case, as the amount of tax relief that can be claimed has not risen in line with the tax rise. Let us hope that, in the coming weeks and months, the UK Government decides to implement the Scottish Government’s eminently sensible proposal and the Treasury changes its mind.
17:33
I congratulate Mark McDonald on securing this important members’ business debate on the changes in taxation for North Sea production that were announced at the last budget. The issue is crucial to north-east members and the decision is detrimental to the vital work of securing Aberdeen’s position as the energy capital of Europe and, as such, a key driver of Scotland’s national economy. There can be no doubt that the decision that was announced in the budget to increase tax on production and reduce tax relief for decommissioning, which Maureen Watt talked about, has already had a negative impact on the industry. Other members and representatives of the industry have talked about how the announcement came as a bolt from the blue, which furthers the changes’ destabilising effect by not allowing companies the time to at least factor them into their future plans.
Many members from the north-east benefited from the briefing from Oil & Gas UK on these issues, as Lewis Macdonald said. It told us that a survey that it conducted showed that 60 projects—one new investment in four—were sufficiently affected by the budget that the probability that they will proceed has been reduced.
We should not talk the industry down but we cannot hide from the scale of the problem that has been presented to us. Economists have estimated that £15 billion to £20 billion of tax revenue will be lost, with projects cancelled and platforms decommissioned, leaving the UK’s reserves in the ground and 15,000 fewer people in employment in the industry over the next decade.
The tax changes clearly threaten the potential to maximise production from the North Sea and they threaten the potential to extend the future of production, and we should be deeply concerned about their impact on employment and on the north-east’s economy.
There are those who will argue that taxing oil and gas production is the right thing to do as we move to greater production from renewable sources. That fails to recognise the extent of the involvement of major companies that, through their success in the oil and gas business, are able to diversify their investment into renewables projects. The workers who are in that industry now will diversify their skills into the growing renewables industry. We have also heard the argument about fuel prices. On fuel costs, the mistake was to put VAT up, which should not have been necessary.
We welcome the First Minister’s submission to the Treasury, which was informed by the work of Alex Kemp, and which makes the case for the Treasury to change its approach. We hope that the submission will be given serious consideration. The UK Government should carefully consider all three proposals that are made in the submission, because there is still time to at least alleviate the impact of this damaging decision if the changes are made. The Scottish Government’s clear preference is for an investment rate of return allowance or an investment uplift allowance. However, the proposals for an extended field allowance could also be of benefit, as such schemes have already been shown to be successful. If an extended field allowance were coupled with further relief at the end of a field’s life, that would help to ensure that maximum reserves are extracted, as would not proceeding with the cap on tax relief on decommissioning.
The change will be of extremely limited consequence to the UK budget during the next few years when budgets are going to be tight, but it will have far-reaching implications for the future of development, as it will make a material difference to decisions on whether projects will be affordable throughout their lifetime.
I welcome the efforts that industry and the Scottish Government have made to engage in constructive dialogue with UK ministers on the issue. I hope that the discussions are fruitful because, if no amendment is made to the budget change, it will damage North Sea production, which is important for the economy not just of the north-east but of the whole of Scotland.
17:37
I should declare that I hold various investment trusts but no holdings in oil companies. All my shareholdings will be disclosed in the register of members’ interests when it is published.
I warmly congratulate Mark McDonald on initiating the debate. It is a matter of considerable importance to have such a debate at this time.
I thank all the members who have spoken, including Alison McInnes and Alex Johnstone, for the tone of the debate. It has been entirely constructive and free from unduly partisan point-scoring. Members across the parties in Parliament all recognise the huge contribution that the oil and gas industry has made, is making and, we all hope, will continue to make to this country of ours. Members from the north-east have particular expertise in and experience of the issues because they represent the part of the country that is associated with oil and gas.
Aberdeen’s reputation goes before it throughout the world, and the skills that oil and gas companies have gained during the past four or five decades have seen them become vital players throughout the world through the exportation of their skills. Companies such as the Wood Group lead the way in the support sector throughout the world. As members have done tonight, it is important that we all record our admiration, respect and appreciation for all those companies, from the managing directors down to the ordinary workers who work in this great Scottish success story.
Alison McInnes referred to international sales. Scotland’s oil and gas companies’ international sales now exceed £7,000 million and account for almost half their total sales. Although North Sea production might have peaked, the industry is still producing 900 million barrels of oil and gas equivalent per year, and significant reserves remain. Between 30 and 40 per cent of the total North Sea reserves have still to be extracted, and as production techniques improve, more and higher percentages of total oil reserves can be extracted, thereby further increasing reserves. It was John D Rockefeller who said in the 1920s that the world had been running out of oil since he was a boy. However, with the correct incentive structure, there remain considerable opportunities in the North Sea and elsewhere off this country, and I am sure that the industry will remain an important part of our economy for decades to come.
However, as members of all parties have rightly argued, the industry’s sustainability is threatened by the increase in the supplementary charge, which we believe is a blunt uniform tax rise. As it raises the tax burden on all existing and future fields, regardless of their potential profitability, it is inevitable that many new developments and incremental projects will have become non-viable overnight; I think that Maureen Watt gave some examples.
The situation for gas companies, which account for almost half of all North Sea production, is of particular concern. The chancellor justified the tax increase on the grounds that oil prices have risen sharply over the past two years, but wholesale gas prices are at the same level that they were at in January 2009, so gas producers have not benefited from the windfall profits that some oil producers have received. As such, there is real concern that many previously profitable gas projects will no longer be viable, which will accelerate the rate of decline in production.
A number of companies have re-evaluated their investment plans. Statoil has put on hold its planned investments to the west of Shetland, and a recent survey of North Sea producers by Oil and Gas UK suggests that a further 60 projects are being re-evaluated as a result of the tax rise. Given the nature of offshore production, those developments are not likely to be scaled back or delayed—they will simply be cancelled. As a result, valuable assets will be lost, which is neither efficient nor in the interests of the Scottish economy, the UK economy, jobs or taxpayers.
The long-term impact of the tax increase on the industry could be even more significant. As other members have highlighted, the research by Alex Kemp suggests that 79 fewer fields may be developed over the next 30 years as a result of the tax rise, which he estimates would reduce investment by £29,000 million and cut production by 10 per cent. The figure that Kevin Stewart cited for the number of jobs that would be lost in the industry as a result was 15,000, which is a massive number. I am pleased that there has been broad recognition across the chamber that that represents a fair summation of the reasonably expressed concerns about the effects that the tax change may have.
Looking forward and being positive, we hope that we can—perhaps through tonight’s debate, the First Minister’s efforts and representations from the oil and gas sector—persuade the chancellor and his team to change tack. The First Minister raised our concerns when he met the chancellor and the UK Secretary of State for Energy and Climate Change last month. On Tuesday, we provided the UK Government with a detailed submission that set out how the North Sea fiscal regime could be amended to mitigate some of the damage caused by the chancellor’s reforms. Our proposals have been implemented successfully in other countries, and the underlying principles are already embodied in the North Sea tax regime. Although they would not completely offset the impact of the tax rise, they would go some way towards ensuring that marginal and incremental projects remain viable, while also ensuring that the country would still capture a substantial share of the windfall that some oil companies are receiving as a result of recent rises in wholesale oil prices.
I am very grateful for the way in which Alex Johnstone pitched his remarks, and I hope that he, in turn, believes that the way in which I have sought to respond to the debate is consonant with his tone and that of others. The proposals that we have put forward have been endorsed by many in the industry and by the Labour Party here in the Scottish Parliament, and we are extremely grateful for that. It is important that the UK Government responds to that broad consensus and amends the Finance Bill to ensure that it does not do lasting damage to one of our country’s most successful industries.
Meeting closed at 17:44.Previous
Decision Time